Thursday, November 19, 2009

Windows 7

The better question to ask is why Microsoft decided to set the price point where they did? And the answer to that one is quite simple: Microsoft doesn’t actually want you to upgrade to Windows 7 at all.

Microsoft wants you to buy a new Windows 7 PC instead.

Setting the price at $119.95 is a brilliant move on Microsoft’s part. The company doesn’t want users to upgrade so by setting the price high Microsoft is essentially imposing a Windows 7 upgrade tax on users. Buy a new Windows 7 PC from Staples and the software price drops to $49.95, the same as Snow Leopard.

Microsoft likes to make money, hence the Windows 7 tax, but their main reason for setting the price so high is to get us all to buy new computers. That brings Microsoft less revenue per unit but more revenue overall as businesses, for example, decide to upgrade a whole office with new PC’s rather than pay $119.95 per desk just for new software. New PCs come with dramatically lower support costs for Microsoft than do retail upgrades. The pricing ploy makes Microsoft very popular, too with its Original Equipment Manufacturers (OEMs) like HP, Dell, and hundreds of others.

Here’s another piece of evidence aiming in the same direction: have you actually done a Windows 7 upgrade? Mine took seven hours! It shouldn’t have to take that long unless part of the goal was simply to discourage upgrading. Snow Leopard took me 20 minutes to upgrade, but then Apple has no OEMs to please (this is key) and makes lots of money on upgrades even at $49.95.

When Windows 95 was introduced (I was there, shooting Triumph of the Nerds), part of the Bill Gates and Jay Leno performance that day was upgrading a 486/66 machine from Windows 3.1 to Win95. It took about half an hour. With more modern processors, memory, disk drives, and a new OS touted as being lean and mean, why should Windows 7 take significantly longer than that to upgrade?

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About Me

I have been at the intersection of IT, Finance and the Pacific Rim for the past 20 years in banking, venture capital, private equity and academia. My recent interests are in the application of technology, especially the internet, in emerging markets.